Blogger
  1. 0
    Fibonacci trading tools are used for determining support/resistance levels or to identify price targets. It is the presence of Fibonacci series in nature which attracted technical analysts’ attention to use Fibonacci for trading. Fibonacci numbers work li...

    Fibonacci trading tools are used for determining support/resistance levels or to identify price targets. It is the presence of Fibonacci series in nature which attracted technical analysts’ attention to use Fibonacci for trading. Fibonacci numbers work like magic in finding key levels in any widely traded security. In this article, I will explain one of the famous Fibonacci trading strategy: retracement to identify support level.

    Fibonacci sequence

    Fibonacci sequence is a series of numbers, starting with zero and one, in which each number is the sum of the previous two numbers.

    1 + 1 = 2
    1 + 2 = 3
    2 + 3 = 5
    3 + 5 = 8…..

    The Fibonacci sequence is 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610……
    It extends to infinity and can be summarized using below formula:

    Xn = Xn-1 + Xn-2

    What are some interesting facts about the Fibonacci sequence?

    There are some interesting properties of the Fibonacci sequence. Divide any number in the sequence by the previous number; the ratio is always approximately 1.618.

    Xn/Xn-1 = 1.618
    55/34 = 1.618
    89/55 = 1.618
    144/89 = 1.618

    1.618 is known as the golden ratio. I would suggest searching for the golden ratio examples on the Google images and you will be pleasantly astonished by the relevance of the ratio in nature.

    Similarly, divide any number in the sequence by the next number; the ratio is always approximately 0.618.

    Xn/Xn+1 = 0.618
    34/55 = 0.618
    55/89 = 0.618
    89/144 = 0.618

    0.618 expressed in percentage is 61.8%.
    The square root of 0.618 is 0.786 (78.6%).

    Similar consistency is found when any number in the sequence is divided by a number two places right to it.

    Xn/Xn+2 = 0.382
    13/34 = 0.382
    21/55 = 0.382
    34/89 = 0.382

    0.382 expressed in percentage is 38.2%

    Also, there is consistency when any number in the sequence is divided by a number three places right to it.

    Xn/Xn+3 = 0.236
    21/89 = 0.236
    34/144 = 0.236
    55/233 = 0.236

    0.236 expressed in percentage terms is 23.6%.

    The ratios 23.6%, 38.2%, 61.8%, and 78.6% are known as the Fibonacci ratios.

    Fibonacci retracement trading strategy

    The Fibonacci ratios, 23.6%, 38.2%, and 61.8%, can be applied for time series analysis to find support level. Whenever the price moves substantially upwards or downwards, it usually tends to retrace back before it continues to move in the original direction. For example, if the stock price has moved from $200 to $250, then it is likely to retrace back to $230 before it continues to move upward. The retracement level of $230 is forecasted using the Fibonacci ratios.


    Continue reading

    1. 0
      Pros of paper trading your algorithmic trading strategy are as follows:- You don’t have to risk real money- Test trading strategies without any stress or emotions- Get to know the different features offered by the trading platform- Paper trade different t...

      Pros of paper trading your algorithmic trading strategy are as follows:

      - You don’t have to risk real money

      - Test trading strategies without any stress or emotions

      - Get to know the different features offered by the trading platform

      - Paper trade different types of orders, instruments, markets etc.

      - You can compare the backtesting performance of your strategy with the paper trading performance in your choice of programming language.

      - You can further optimize your algorithmic trading strategy based on paper trading results

      - Verify the robustness of the trading API solution which you’ll be using once you go live.

      Source: https://www.quantinsti.com/blog/paper-trading-algo...

      1. 0
        All you need to know about Binary OptionsBinary options are exotic options which were typically available on OTC markets. But now, thanks to the information age, even a day trader or a private investor can trade these products. Before you go ahead and rea...

        All you need to know about Binary Options

        What Are Binary Options?

        Binary options are exotic options which were typically available on OTC markets. But now, thanks to the information age, even a day trader or a private investor can trade these products. Before you go ahead and read this blog, a word of caution regarding the trading of these binary options. The Binary Options are not legal in India, but they are extensively traded in the UK, and are largely seen as something close to gambling by the rest of the trading fraternity. Binary options are not regulated by any exchange or government and carry a lot of risks.

        Now coming back to the actual trading part, as the name suggests it is binary in nature, that is, binary options always provide two choices to the trader and pose a singular unique question. The question posed by each of them is different, and if you understand what that is then you will be able to trade it easily.

        If you can answer the question with a certain degree of confidence, then you have the eligibility to trade these exotics. Like the normal put and call options are known as vanilla, as in ice cream flavors, we have many exotic flavors available in options too. I have listed a few that are supported by trading platforms currently.

        Types of Binary Options

        High/Low Binary Option

        This is a very simple binary option. All you need to do is predict if the market will go higher or lower by the time of expiry. And the time of expiry is usually your choice, that is, you can choose the expiry from a range of 30 seconds to a few days. I will explain this in detail with an example.

        High and Low Binary Option

        The above pic is taken from IQ option demo platform. Here you can see that the candle expires every minute (on the X-axis) and I bought a put worth $1 at the price denoted by the red horizontal line, and as you can see the candle closed at the white horizontal line, which is higher than my strike, resulting in a loss of the $1 that I had invested. Had my prediction been correct I would have received an X% as profit along with my initial investment of $1. This percentage profit is usually fixed and known before the trade is executed, this feature of knowing your risk enables you to balance your strategy allocation by adjusting your risk and reward in advance.

        This is also the reason why people tend to apply Martingale or Inverse Martingale to their bets, to manage the risk. As it turns out, usage of Martingale is exactly the reason why Binary Options are considered as more of gambling than trading.

        One Touch/No Touch

        The question that you will need to answer before trading a One Touch option is:

        “Will the stock trade the price X, before expiry?”

        The No Touch option is an exact negation of this statement- “Will the stock not trade this price?”

        Similar to what we have seen earlier in High/Low option, at the time of entering the trade you know the time to expiry and the return that you will be getting if your prediction is correct. The difference in returns between One Touch and High/Low is significant. The average return for a High/Low option is of the order 50% – 100%. But a One Touch option will have an average return of the order of 400%. Usually, the magnitude of the payout of a Touch option would depend on how far the strike price is from the current market level. The closer the point, the easier it is for the market to reach and hence will carry a lesser return, and for a no touch option the exact opposite is true for its return.

        Range/ Boundary

        As the name suggests, by buying this option you will be betting that the option would trade in a particular range. Like in the previous option types, the expected return would depend on how close the range is to the current market trading price. This option can be understood as a combination of two No Touch trades, that is, you expect the market to not trade one price above the current market level and one below. This is obviously a strategy that works best in low volatile conditions. When the directional prediction of the market which is needed in the previous two strategies becomes difficult then you can use this range option to play safe and make money. But unfortunately, only a few brokers, if any, offer this kind of flexibility.

        There are many other complex binary options traded in the market. But there are very few that can be traded online. The above mentioned binary options are mostly available on many trading platforms. Let us look at a few of them.

        Binary Options Trading Platforms

        IQ Option

        IQ Option

        This is the user interface that would see once you register for the demo account. You also get $10,000 practice money in your demo account for paper trading. As you can see, there is no option for other options. This is one of the drawbacks of this otherwise very good binary options broker. You can only trade High/Low options and they don’t have the facility to trade Boundary or Touch options. I hope they will come up with those as well. Speaking about IQ Option, it started in 2012, offers a free demo account to help you get started, and the minimum deposit is just $10 for the Real Account, which is really cool.

        Binary

        This is a very popular site and provides many types of binary options. Just look at the screenshot below and you can see.

        binary options website

        Like IQ Option you do have a demo account or paper trading money available with this broker. You can try the virtual account to do a test run before you actually trade all these different types of Binary Options. There is another significant advantage to the options traded with this broker- You can set the trading time (entry time) aside from the expiry date. Even here, the minimum deposit is $10 and for e-wallets it is $5. There’s a 1.5% payout commission when you withdraw your money.


        Read more

        1. 0
          Portfolio Analysis: Calculating Risk and ReturnsIntroductionThe process of trading is a complex one with a number of steps like stocks selection, the formation of strategies, and creation of a portfolio and so on. Here, we will focus on one such step whic...

          Portfolio Analysis: Calculating Risk and Returns

          Portfolio Analysis - Calculating Risk and Returns

          Introduction

          The process of trading is a complex one with a number of steps like stocks selection, the formation of strategies, and creation of a portfolio and so on. Here, we will focus on one such step which is computing the expected returns and variances for a portfolio having n number of stocks.

          Expected return on a single stock

          The expected return of a portfolio provides an estimate of how much return one can get from their portfolio. And variance gives the estimate of the risk that an investor is taking while holding that portfolio. The returns and the risk of the portfolio depending on the returns and risks of the individual stocks and their corresponding shares in the portfolio.

          The parameters of the risk and return of any stock explicitly belong to that particular stock, however, the investor can adjust the return to risk ratio of his/ her portfolio to the desired level using certain measures. One such measure is to adjust the weights of the stocks in the investors’ portfolio.

          Here we will discuss how the weights of individual stocks impact these two parameters of the portfolio. Consider a stock ABC. Let ri be the expected return on the stock and rx be any return having a probability of px. The expected return, ri, can be computed using the below equation.

          expected return equation

          Let us assume that ABC can generate the returns as per column A with corresponding probabilities given in column B. The expected return from ABC can be computed as shown in column C, which is the product of columns A and B.

          expected return

          Let us look at the code to compute the expected return of this stock. We start by importing the pandas library.

          import pandas

          code to compute the expected return of stock

          The expected return on the stock is 8.10% as per the calculations shown above. The returns in column A can be computed using Capital Asset Pricing Model (CAPM).

          Risk (or variance) on a single stock

          The variance of the return on stock ABC can be calculated using the below equation.

          Variance of the return on stock

          The following table gives the computation of the variance using the same example above.

          computation of the variance

          We can compute the variance of the single stock using python as:

          compute the variance of the single stock

          Hence, the variance of return of the ABC is 6.39. The standard deviation of the returns can be calculated as the square root of the variance.

          standard deviation of the returns

          Having computed the expected return and variance for the stock, we will now see how to calculate the return and variance of the portfolio. We use the expected return and variance of the portfolio to optimize it. We can adjust the weights of the stocks to maximize the return and minimize the standard deviation.

          Expected return on an n-stock portfolio

          Let us take an n-stock portfolio. Assume that the expected return from ith stock is ri. The expected return on the portfolio will then be:

          n-stock portfolio

          The weight of any stock is the ratio of the amount invested in that stock to the total amount invested. For the below portfolio, the weights are shown in the table.

          weight of stock

          Let us see how we can compute the weights using python for this portfolio.

          compute the weights using python

          The sum of the weights of all the stocks in the portfolio will always be 1. Next, we will see the expected return on this portfolio.

          expected return on the portfolio


          Read more

          1. 0
            Sometime back I came across these interesting lines on Trading. “In Trading, relying on hopium is worse than addiction to opium. Your gains will be nil and your trades typically will result in pandemonium.” Hope is never a profitable trading strategy and...

            Paper Trading Algorithmic Strategies

            Sometime back I came across these interesting lines on Trading. “In Trading, relying on hopium is worse than addiction to opium. Your gains will be nil and your trades typically will result in pandemonium.” Hope is never a profitable trading strategy and hence it becomes paramount for all traders to ensure that they perform robust backtesting to evaluate a strategy’s performance and also conduct paper trading before taking their algorithmic trading strategy live.

            This article attempts to cover the paper trading part in the strategy testing process. In our Executive Programme in Algorithmic Trading (EPAT™) we take our course participants through the entire process of building algo strategies. It starts with knowing the basics of financial markets, algorithmic trading, mathematics and statistics, derivatives, programming and trading platforms. Our expert faculty then guides our EPAT™ students to combine this knowledge to build profitable algo trading strategies.

            Flow chart of Algo Strategy Creation

            Flowchart of Algo Strategy Creation

            The flow chart shown above depicts the process of building a trading strategy. As can be seen in this flowchart, paper trading or virtual trading is an important element in the strategy creation process. The pros of paper trading your algorithmic trading strategy are as follows:

            • You don’t have to risk real money
            • Test trading strategies without any stress or emotions
            • Get to know the different features offered by the trading platform
            • Paper trade different types of orders, instruments, markets etc.
            • You can compare the backtesting performance of your strategy with the paper trading performance in your choice of programming language.
            • You can further optimize your algorithmic trading strategy based on paper trading results
            • Verify the robustness of the trading API solution which you’ll be using once you go live.

            Virtual trading has certain cons like you cannot ascertain the market impact of your paper trades or the slippage costs that you can incur in live trading which may not be reflected in your paper trades. One needs to be aware of these cons while evaluating the final performance of your paper trading strategy.

            Who can benefit from a Paper Trading Account?

            Following are the parties who can benefit from a paper trading account.

            • Students who are learning algorithmic trading
            • Newbie traders who have trading ideas and want to test them before taking them live
            • Experienced traders who want to explore their algorithmic strategies in untested markets

            How does Paper Trading work?

            Some brokers provide a paper trading (virtual trading) environment within the live trading account and you need to select the paper trading feature once you login to your live trading account. This will activate the simulated trading environment. Some other brokers provide paper trading login credentials which are separate from your live trading account.

            Paper trading works almost like a live trading account. You get to use most of the order types, trade different instruments and try different features offered in the trading platform.

            You might need to configure your paper trading account and may require market data subscriptions or these can be the same as your live trading account. You are provided with a certain amount of equity to facilitate the trades. The value of this equity will wary based on the profit/loss made by the strategy in paper trading. You can also reset this equity value back to the original amount in case you want to trade other new strategies.

            Trades entered using paper trading account are not actually executed on any exchange. However, the price of your trade executions will be determined by the real market prices and sizes.

            Your broker will provide you with a paper trading account statement at the end of each day which can be accessed from the reports menu.

            Brokers with Paper Trading Facility

            If you are convinced of the importance of paper trading and have decided to paper trade your algorithmic trading strategies, then ideally your paper trading and live trading platform should be the same. Not all brokers provide a paper trading account. Hence it becomes imperative for you to do so some research before you decide to open a trading account with a particular broker.

            (Read More)

            1. 0
              Earnings announcement events are important events for investors and traders. Earnings results of a company tend to determine the future price direction of a stock and hence these are closely followed and analyzed by them. The period around the date of the...

              Earnings Announcement Strategies Extracting Earnings Dates

              Earnings announcement events are important events for investors and traders. Earnings results of a company tend to determine the future price direction of a stock and hence these are closely followed and analyzed by them. The period around the date of the earnings announcement sees increased volatility in price and the traded volume of the stocks. Traders can take advantage of this by using different earnings announcement trading strategies.

              You can check the “Screener” page on the Quantpedia site where they have listed different earnings announcement trading strategies. The “Screener” page on Quantpedia categorizes hundreds of trading strategies based on different parameters like Period, Instruments, Markets, Keywords etc. Quantpedia has made some of these trading strategies available for free to their users.

              Some of the earnings announcement strategies listed on the Quantpedia site include:

              To formulate and backtest any earnings announcement strategy, we need the historical dates of earnings release for any given company. Once the dates are extracted, an earnings announcement strategy can be formulated using these dates and other important data like price-volume history, historical performance numbers like sales, profit margin, net margin etc.

              Earnings release dates can be obtained from different sources; a financial markets portal being one of such sources. The goal of this article is to extract the historical earnings dates from a popular financial markets portal using Python.

              Corporate Events Table

              Python Code for Extracting Historical Earnings Release Dates

              Step 1: We first import the required libraries; requests, pandas, and BeautifulSoup. We then copy the URL from the financial market portal for the particular company.

              (Read more)

              1. 0
                Earnings announcement events are important events for investors and traders. Earnings results of a company tend to determine the future price direction of a stock and hence these are closely followed and analyzed by them. The period around the date of the...

                Earnings Announcement Strategies Extracting Earnings Dates

                Earnings announcement events are important events for investors and traders. Earnings results of a company tend to determine the future price direction of a stock and hence these are closely followed and analyzed by them. The period around the date of the earnings announcement sees increased volatility in price and the traded volume of the stocks. Traders can take advantage of this by using different earnings announcement trading strategies.

                You can check the “Screener” page on the Quantpedia site where they have listed different earnings announcement trading strategies. The “Screener” page on Quantpedia categorizes hundreds of trading strategies based on different parameters like Period, Instruments, Markets, Keywords etc. Quantpedia has made some of these trading strategies available for free to their users.

                Some of the earnings announcement strategies listed on the Quantpedia site include:

                To formulate and backtest any earnings announcement strategy, we need the historical dates of earnings release for any given company. Once the dates are extracted, an earnings announcement strategy can be formulated using these dates and other important data like price-volume history, historical performance numbers like sales, profit margin, net margin etc.

                Earnings release dates can be obtained from different sources; a financial markets portal being one of such sources. The goal of this article is to extract the historical earnings dates from a popular financial markets portal using Python.

                Corporate Events Table

                Python Code for Extracting Historical Earnings Release Dates

                Step 1: We first import the required libraries; requests, pandas, and BeautifulSoup. We then copy the URL from the financial market portal for the particular company.

                (Read more)

                1. 0
                  Earnings announcement events are important events for investors and traders. Earnings results of a company tend to determine the future price direction of a stock and hence these are closely followed and analyzed by them. The period around the date of the...

                  Earnings Announcement Strategies Extracting Earnings Dates

                  Earnings announcement events are important events for investors and traders. Earnings results of a company tend to determine the future price direction of a stock and hence these are closely followed and analyzed by them. The period around the date of the earnings announcement sees increased volatility in price and the traded volume of the stocks. Traders can take advantage of this by using different earnings announcement trading strategies.

                  You can check the “Screener” page on the Quantpedia site where they have listed different earnings announcement trading strategies. The “Screener” page on Quantpedia categorizes hundreds of trading strategies based on different parameters like Period, Instruments, Markets, Keywords etc. Quantpedia has made some of these trading strategies available for free to their users.

                  Some of the earnings announcement strategies listed on the Quantpedia site include:

                  To formulate and backtest any earnings announcement strategy, we need the historical dates of earnings release for any given company. Once the dates are extracted, an earnings announcement strategy can be formulated using these dates and other important data like price-volume history, historical performance numbers like sales, profit margin, net margin etc.

                  Earnings release dates can be obtained from different sources; a financial markets portal being one of such sources. The goal of this article is to extract the historical earnings dates from a popular financial markets portal using Python.

                  Corporate Events Table

                  Python Code for Extracting Historical Earnings Release Dates

                  Step 1: We first import the required libraries; requests, pandas, and BeautifulSoup. We then copy the URL from the financial market portal for the particular company.

                  (Read more)

                  1. 0
                    Impact of automation, surging layoffs in the financial sector, the rise of robots and threat to our future, the list of such articles on the net seems endless.But have you ever been in a similar situation?Have you ever been at the risk of a layoff for wan...

                    How Can An MBA In Finance Become A Quant

                    Impact of automation, surging layoffs in the financial sector, the rise of robots and threat to our future, the list of such articles on the net seems endless.

                    But have you ever been in a similar situation?

                    Have you ever been at the risk of a layoff for want of better skilled, technologically enhanced workforce?

                    What did you do then?

                    Those from an MBA-Finance background evidently aspired to master their chosen field of work. Choosing to go for an MBA in finance would mean you are good at numbers, strategies, and money-making in general.

                    But what if, after certain years of work and excellence at it, you feel saturated again?

                    Either situation, an expected threat of layoff or a saturation from existing profile, both need a career upgrade.

                    Considering to upgrade your knowledge and career options?

                    Become a Quant.

                    As financial securities become increasingly complex, it is still interesting to note that it is the people who understand the trading strategies and are responsible for incorporating the same in algorithms.

                    Complex mathematical and financial models are drafted, interpreted and put to use by computerized mechanisms. There has been a steady growth in demand for people who not only understand the complex mathematical models that price these securities, but who can enhance them to generate profits and reduce risk. These individuals are known as quantitative analysts. To be specific, the people behind quantitative trading strategies are referred to as quants and quant traders.

                    Quantitative analysts design and implement complex models that allow financial firms to price and trade securities. They are employed primarily by investment banks and hedge funds, but sometimes also by commercial banks, insurance companies and management consultancies, in addition to financial software and information providers.

                    How to become a Quant?

                    Quants employ programmatic languages to deploy discretionary methods of trading. Primary methods of trading include traditional trading strategies. The same strategies which you may have acquired after a keen observation of the market data.

                    (Read more)

                    1. 0
                      The limited commercial usage of Cryptocurrency hampers a lot of us from investing heavily in cryptographic money forms. And every single Bitcoin is a heavy investment, considering 1 single unit amounts close to 7276 US Dollars. Good or bad investment? Tha...

                      Getting Started With Cryptocurrency Algorithmic Trading

                      The limited commercial usage of Cryptocurrency hampers a lot of us from investing heavily in cryptographic money forms. And every single Bitcoin is a heavy investment, considering 1 single unit amounts close to 7276 US Dollars. Good or bad investment? That is for time to tell.

                      The popularity and buzz, however, intrigues us. The on-going debate – Is cryptocurrency to be the future money- finds new platforms every day and doesn’t lose charm on the existing ones.

                      Promoters of the currency have their own novel ways. I read an article which enunciated ten different ways of using cryptocurrency. One of them included a café that accepts cryptocurrency. The café happens to be in the neighborhood of Bumblebee Exchange, promotionally- Toronto’s first Robocoin kiosk. Other examples cited were commercial avenues which were first of their kind to start accepting Bitcoin as currency, the first online travel agency, the first university to accept cryptocurrency and the first crowdfunding platform that uses Bitcoin.

                      The penetration of cryptocurrency for commercial purposes is limited to singular episodes in each category but the usage for trading has gained substantial popularity. Macro and micro variables that impact the price movement for cryptocurrency are highly volatile and so are price fluctuations. The fact makes cryptocurrency a very lucrative option for intra-day and high-frequency traders. The most popular aspect of cryptocurrency is the transparency of transaction also called the ‘blockchain effect’.

                      A universal currency with open book ledger for everyone to see, with an exceptionally high value and high volatility, why would cryptocurrency not be the most popular debate of the century?

                      (Read More)

                      5
                      followers
                      0
                      following
                      About
                      No information